Aer Lingus battles Ryanair with new route and revised forecast

22nd Dec 2008

Aer Lingus has announced plans to resume flights between Shannon and Heathrow in March 2009 as part of its battle plan to prevent a hostile take-over from Ryanair.

The airline had been under pressure from the Irish government to reinstate the route, which it controversially scrapped last January after 60 years of service. The Irish carrier was one of Shannon’s biggest customers and the Heathrow service one of the airport’s biggest. The route was closed when the airline switched its Heathrow slots to Belfast International for commercial reasons.
The decision caused the executive chairman of Shannon airport, Pat Shanahan, to stand down.
The reinstatement is seen to curry favour with the Irish government, which holds a 25% stake in the company and is a key ally in its battle to prevent a hostile take-over from Ryanair.
“We are very pleased to be in position to recommence the Shannon-Heathrow service and I want to acknowledge the huge contribution of our staff and Shannon Airport Authority in making this a reality,” said Aer Lingus boss Dermot Mannion.
“The restoration of global connnectivity for the mid-west region is all the more important now in these particularly difficult economic circumstances,” said Irish transport minister Noel Dempsey.
Separately, Aer Lingus also issued a statement revising its trading forecasts for 2009 upwards, as part of its defence against the Ryanair bid. It predicts it could return to profit next year, or break even, rather than lose €20m (£18.6m).
Only weeks ago, investors were told to expect a loss. However today’s letter urges them to reject the €748m Ryanair bid, which it describes as “opportunistic” and “fatally flawed”.
In the letter, Aer Lingus’ new chairman, Colm Barrington, argues that Ryanair’s offer of €1.40 per share fundamentally undervalues the Aer Lingus brand, the airline’s strong financial position and its bullish growth prospects, as well as “seeks to undermine Aer Lingus’ vibrant future as an independent airline”.
“Ryanair claims that Aer Lingus needs Ryanair to survive and to continue to grow. This is emphatically not the case. Aer Lingus has grown strongly in the face of direct and aggressive competition from Ryanair for over 20 years. Ryanair seeks to gain opportunity and value from what Aer Lingus has created,” the chairman said.
“It is simply untrue that Aer Lingus is a uniquely isolated airline incapable of an independent future,” he continued. “Airline failures in 2008 have generally been among the smaller, poorly financed and weaker airlines. Aer Lingus, with its 10 million passengers, its 106 routes, its 42 aircraft, and its €1.3 billion in the bank, is not one of these weak carriers. Aer Lingus does not need to be rescued by Ryanair!”


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